Macy’s has announced that the beginning of this week it will furlough the majority of its employees in an effort to transition to an “absolute minimum workforce”.
Like other retailers, Macy’s has seen a drastic loss of sales; due to both forced closures of stores and fear from consumers who are staying home during the pandemic. Other big name retailers, such as Nordstrom, DSW, Kohl’s, and Gap have also announced their own furloughs. And as more areas around the country encourage stay at home orders, experts are predicting other companies to follow suit.
Kohl’s has stated the furloughs will apply to 85,000 of their 120,000 employees spread throughout stores and distribution centers. The company has also said it will continue to ship products as well as provide curbside pickup from stores operating with a limited number of staff.
Gap’s furlough will affect ~80,000 out of 129,000 employees.
The continued furlough of workers around the country has not been surprising. For retailers, labor accounts for the single largest monthly fixed cost, and as cash reserves are depleted, retailers just would not be capable to pay employees. The effects this will have on the economy is to be seen, but will for sure be felt as the retail industry supports ~ 1 out of 4 workers.
“This could push us further into a damaging recession that will last longer than the duration of the crisis,”.Neil Saunders, managing director of GlobalData Retail
According to Sanders, more than 190,000 retail stores have temporarily closed; accounting for almost 50 percent of the US retail square footage. Its predicted that most department stores can make it between 5 to 8 months with the current cash reserves they have.
“Macy’s entered this crisis in a weak position and it is now one the retailers most affected by the decline in sales as consumers stay home,” Saunders said. “Given the scale of the collapse and the high cost base of Macy’s operations, furloughing staff has become inevitable as the shutdown of the consumer economy drags on.”
In an effort to preserve cash, retailers such as Macy’s and Kohl’s are said to have suspended their dividend, frozen spending and hiring, canceling orders, and drawing down lines of credit.
While Macy’s has said they expect to bring back workers on a staggered basis, that viability has been questioned. Not just in Macy’s case though (which announced the closure of 125 stores in February; a fifth of its total), but for many retailers who have been struggling against the shift towards online retail even before this pandemic.
Though Macy’s situation is not ideal, the picture is even more bleak for the workers. As the pandemic continues, how long will the average American be able to last for before the depletion of their ‘cash reserve’? Congress recent passing of the relief bill is sure to help, however will not last long since being stuck at home means not being able to earn a paycheck.